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Buying low cost property for rental...whats your take?
Rank: Elder Joined: 12/7/2012 Posts: 11,937
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KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income.......
That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries.
I am a resident, and will deduct interest as an expense.
I think where GG is coming from at 156k per month, regardless of what expenses and deductions you create/come up with, it is highly that you will be at the upper bracket of taxation. In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Member Joined: 1/13/2014 Posts: 398 Location: Denmark
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Angelica _ann wrote:KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income.......
That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries.
I am a resident, and will deduct interest as an expense.
I think where GG is coming from at 156k per month, regardless of what expenses and deductions you create/come up with, it is highly that you will be at the upper bracket of taxation.
ofcos the rental income will be at the 30% bracket since am sure other incomes eg employment income will have covered the other part of the graduated scale. Seeing is believing
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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KulaRaha wrote:Mucene wrote:Gordon Gekko wrote:30% taxes on rental income.......
That's for non-resident taxpayers. Residents are taxed at the graduated rates just like income tax on salaries.
I am a resident, and will deduct interest as an expense.
You need to be smart about it, for an individual mortgage relief on interest expenses is a maximum of ksh 150,000 per year, which is certainly a lot less than interest payments for a ksh 20M mortgage. You can get round this by forming a company to own the property.
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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I have incorporated an SPV just for this. The bank has been given comfort via a guarantee from me. Business opportunities are like buses,there's always another one coming
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Rank: Elder Joined: 12/7/2012 Posts: 11,937
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So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership! In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Member Joined: 1/13/2014 Posts: 398 Location: Denmark
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Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!
Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions. Seeing is believing
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Rank: Elder Joined: 12/7/2012 Posts: 11,937
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jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!
Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions.
Kindly expound ... simple language? In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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Angelica _ann wrote:jawgey wrote:Angelica _ann wrote:So when you do flats/apartments, you are better off with a ltd co. than holding the title under individual name or joint ownership!
Most definitely! esp now with itax .. KRA itanasa landlords wengi.. plus you get to enjoy capital deductions.
Kindly expound ... simple language?
At its simplest:
You build (not buy) a block with ksh 1 million
Your income from the block is 200,000 per year
Your tax is 30% of 200,000 = 60,000
Capital deductions per year is 1 million/40 = ksh 25,000
Your tax, if you claim capital deduction is 30% of 175,000 = 52,500
So, you save ksh 7, 500 tax (60,000 - 52,500) each year for 40 years
terms and conditions apply.
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Rank: Elder Joined: 12/7/2012 Posts: 11,937
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^thanks! In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: New-farer Joined: 5/30/2013 Posts: 56 Location: Mini Apple
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dunkang wrote:a4architect.com wrote:@kendata26, how are you arriving at returns of 3% for the 28m cost?
Am not @Kendata26 but i can help explain.
Assuming that you bought the property for KES 20M.
Also, assuming your rental income for 15 years is KES 28M.
Now, the gross profit for the entire 15 years is KES 8M. That is, KES 0.533M annually.
This translates to 2.67% annually (on gross rental income).
Pole for missing in action. Weather in my hood has finally turned so I've been outside enjoying it!
@Dunkang explained it well. Assuming the cost of the unit goes up, the returns will be better than this and make the price reasonable (i'm assuming the price of buildings appreciates similar to plots in Nairobi).
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Buying low cost property for rental...whats your take?
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